The phrase 'regime change' has had violent connotations since the Iraq war of 2003, but these are the words many in the Japanese financial sector have started to use in recent weeks. The combination of a new prime minister, Shinzo Abe, and a new Bank of Japan (BoJ) governor, Haruhiko Kuroda, holds out the promise of a radical overhaul of fiscal and monetary policy.
And Japan needs change. The country has been locked in a largely unbroken cycle of deflation for about two decades, discouraging consumer spending and corporate investment alike. Mr Abe and Mr Kuroda have signalled their determination to raise inflation to 2% in two years, compared with -0.2% at the latest reading. No one is under any illusion about the difficulty of achieving this target – inflation has reached 2% for only four months during the past 20 years.
